European Regional Development Fund

Written evidence submitted by Chesterfield Borough Council

Summary

How, and on what, is ERDF spent?

The ERDF PA2 funding has supported a number of important projects within the Borough of Chesterfield, including:-

· The Destination Chesterfield project which has been a high profile place marketing project which is now in its second phase of delivery. The projects key activities include: The implementation of brand identity, storybook and toolkit for Chesterfield as a leading business location; Production of place specific marketing materials; Maintaining Chesterfield's commercial web presence; Improving commercial pride in Chesterfield through ensuring positive public relations opportunities are maximised and success stories shared; Sponsorship of business events/other activities that support the roll out of the "big Idea" as highlighted in the Phase 1 Implemention Plan; Enhancement of quality of public/business realm. The ERDF contribution has enabled the development of a strong public/private partnership lead by a private sector chair to ensure successful delivery of the project.

· The Creating Links project provides the lynch pin between developers of strategic sites, employers locating onto those sites and the local supply chain. The post identifies what developers and employers need including skills requirements and the supply of goods and services and makes the necessary connections to maximise the impact of major regeneration schemes for local communities and businesses. The post has been instrumental in bringing forward schemes identified in the Chesterfield Town Centre Masterplan.

· The re-development of the iconic grade 2 listed Market Hall to include the provision of office accommodation and business conferencing facilities on the upper floors, ensuring that this local asset is available for use by future generations.

· The Chesterfield Cultural Renaissance project which is making improvements within The Yards business area ofn the town centre through the innovative use of artistic public realm with a view to increasing footfall in the area to the benefit of local businesses and the wider economy.

· The new Innovation Support programme will enable innovative business based in Chesterfield, including those in the two innovation centres, to access advice and support to grow their businesses.

These example projects were needed to stimulate new business investment in the local economy and have been realised as a result of locally managed ERDF allocations, aligned to the Local Investment Plan priorities.

Is the taxpayer in England obtaining value for money from the ERDF?

The Operational Programme intervention rate, for PA2, is set at 62.72% and the average ERDF intervention rate, for the East Midlands region, is just over 40%, demonstrating the level of leverage achieved through match funding. At local level, a key objective is to achieve a wide distribution of ERDF, by encouraging projects to secure appropriate match funding and return good value for money for the taxpayer.

Could the funds contributed to, and paid out on, regeneration through ERDF be spent more effectively by repatriating ERDF to the Government in London?

Repatriating ERDF to central Government would be a backward step in terms of enabling local communities and agencies in deprived areas to have a say in how funds are utilised. Those operating in deprived communities are best place to determine the needs of those communities and a potentially blanket approach to regeneration is not helpful in addressing specifically local needs. The current programme has successfully promoted economic activity in disadvantaged communities. Centralisation would be likely to create barriers, that could hinder local ambition and would be totally at odds with the Localism/decentralisation Agenda.

With the abolition of the Regional Development Agencies responsibility for ERDF in England passes to DCLG. What effects are these changes having on the administration, assessment, and payment of ERDF?

The assessment process and administration of ERDF has always been onerous, however, since DCLG have assumed responsibility this seems to have become even more protracted, and has added a significant burden to those managing projects. The wind down of the PMC and establishment of the new Local Management Group has taken longer than necessary. The apparent continued uncertainty surrounding central Government’s policy on the application of European Funding, including the potential for matching or substituting other funding mechanisms, has caused the reassessment of the Operational Programme priorities and the values ‘reserved’ for contingencies such as exchange rate fluctuations and administration etc . In particular, DCLG appears to be delaying the release of these exchange rate contingencies to the point where there simply will not be enough time for the funding to be used.

INTRODUCTION

The East Midlands 2007-13 ERDF Programme under Priority Axis 2 (PA2), the five PA2 eligible district/borough areas of the former North Derbyshire and North Nottinghamshire coalfields (Ashfield, Bassetlaw, Bolsover, Chesterfield and Mansfield) produced a joint Local Investment Plan to focus project activity on developing sustainable economic and enterprise activity in the most disadvantaged areas of the Districts/Boroughs.

The Local Investment Plan key priorities are to:

· Stimulate and support new markets and enterprise opportunities

· Develop employment sites and premises

· Provide access to resources and support

· Revive local infrastructure and environments

The programme allocation for the five districts was approx. £29m of which £5.5 remains unallocated. A recent call in February for expressions of interest (EOI) has generated project submissions to the value of £9m, which is very encouraging, however £3.5m rely on Growing Place Funding to match ERDF, which increases the risk that these projects will not progress if the competitive funding bid is unsuccessful, this was shown to be case with Regional Growth Fund as match.

On a regional level to the end of January 2012, the programme has formally accepted or offered funding agreements for projects valued to approx. £183.6m ERDF, within the programme value of approx. £231m. A regional call for innovation projects under Priority Axis 1 (PA1) in May 2011 received EOI’s worth £74.8m ERDF for £19m remaining to be allocated, of these approx. £18.6m have progressed to full application. Funding agreements have committed approx. £3.3m ERDF and the pipeline projects proceeding to appraisal/endorsement would allocate a further £10m to this call, of the £19m agreed.

ISSUES FOR CONSIDERATION

How, and on what, is ERDF spent?

A key element of PA2 is the spatial targeting to districts, focussing on the most disadvantaged areas as a result the type of projects supported have mainly been under the following categories:

§ Capital projects including business centres, business realm and physical regeneration initiatives;

§ Pre-start or start up business support services;

§ SME business support including investment promotion.

Is the taxpayer in England obtaining value for money from the ERDF?

The outputs, results and impacts for the East Midlands Operational Programme are expected to achieve the targets shown in the table below and the actual contacted figures for projects funded through the ERDF Competitiveness Programme:

Outputs, Results, Impacts	Target	Contracted
Businesses assisted to improve performance	9,300	12,417
Businesses engaged in new collaborations	2,300	3,159
Public and private investment leveraged	€ 216m	€ 74.4m
New or upgraded floorspace	36,000 Mt2	57,571Mt2
People assisted to start a business	2,700	4,197
Brownfield land reclaimed	17ha	17ha
Jobs created	8,600	5,154
Businesses improving performance	7,200	5,147
New businesses created and new businesses attracted to the region	2,000	1,684
Graduates placed in SME’s	4,000	1,572
GVA resulting from businesses improving performance.	€ 263m	€ 136.9m

The contracted targets, though exceeded in some cases, may be more challenging in others, particularly the underperforming target of public and private investment leverage. This resulted from the change in Government policy, the comprehensive spending review, and the immediate spending cuts which created two main areas of uncertainty:

§ Funding restrictions on public sector bodies cast doubt on the capacity to match fund ERDF allocations affecting the programme overall, however this is particularly marked under PA2 due to the withdrawal of Single Programme funding.

§ Abolition of the Regional Development Agencies (RDAs) and the Government Office for the East Midlands. The establishment of Local Management Committee for managing and delivering the Operational Programme document which was re-submitted to the Commission (2011) to reflect any subsequent changes made to the management arrangements.

The value for money derived from ERDF, should be measured by ‘additionality’ the programme has funded in the East Midlands where projects would not have found funding from alternative sources. The recent restrictions in public spending, despite the impact on match funding, have sharpened the impact of the additional resources made available under the ERDF programme.

Could the funds contributed to, and paid out on, regeneration through ERDF be spent more effectively by repatriating ERDF to the Government in London?

The spatial focus should be retained and resources made available to partner organisations in the public sector to bring forward projects. There remains a significant need to address local economic disadvantage through a structure which allows localised programme delivery. Local delivery is critical to finding solutions that effectively address local issues. The huge variances in industry and economic drivers across the country would only serve to weaken the effectiveness of the ERDF should it be managed and delivered centrally. Justification to retain the existing delivery structure is in the discretionary powers of the PMC/LMC to raise the intervention rate in Priority Axis 2 which has resulted in improved uptake of ERDF. An example of the LMC freedoms and flexibilities is an exceptional approval for a higher intervention rate for a Business Centre project at Hucknall, due to the withdrawal of the Single Programme funding, that removed a source of match funding needed to deliver the project. The applicant subsequently managed to secure £130K towards the cost of the project from the District’s LAA Reward Grant and the PMC approved an intervention rate above the Priority Axis 2 standard maximum intervention rate of 62.72%. This flexibility was allowed, as the overall intervention rate, for Ashfield’s allocation would still not exceed 62.72%. So far, under Priority Axis 2 the global intervention rate currently stands below the average, at around 40%, leaving scope for intervention rates to rise to enable the development of quality projects.

In addition, the Government’s commitment to ‘local’ regeneration was set out in ‘Regeneration to enable growth’, which puts local communities ‘in the driving seat’ to end top-down regeneration. It commits to devolving a range of powers and opportunities to local people, communities, businesses, local authorities, and civil society organisations to allow direct access to resources and funding to support local regeneration projects - including continued European Regional Development and Rural Development funds.

With the abolition of the Regional Development Agencies responsibility for ERDF in England passes to DCLG. What effects are these changes having on the administration, assessment, and payment of ERDF?

DCLG performance under Priority Axis 2 during 2007-2010 in terms of the funds allocated to approved projects was hampered by the lack of pipeline projects once the programme commenced, and by the requirement to assess project additionality against the ‘Solutions for Business’ business support activity. Following the removal of Business Link ‘face to face’ services, there has been opportunities for providers to bridge the gap for locally delivered business support services.

A criticism of the transition to DCLG management is the dismantling of the Sub Groups supporting the former PMC, recently new structures have been established however these are not seen by Partners as representative. The concern is that districts are excluded from the forum decision making on major issues which are likely to affect the programme over the coming months, such as the matters addressed within this consultation.

It will also be important that the new Investment Sub Group structure develop a positive and cooperative outlook in contrast to the somewhat adversarial approach that seems to have been the case in some instances to date.

Conclusion

On a regional level the ERDF team is highly regarded, with an acceptance among partners that the process of application and approval will always be rigorous and time-consuming. Many aspects of the process are routine and cause no problem, however there is concern about approval and claims processes which should be improved in terms of better communications. There may also be opportunities for the ERDF team to develop a more proactive role with the creation of a Challenge Fund, by taking a lead in indentifying the regional gaps in the portfolio of projects that partner organisations might start to fill.

There continues to be very high levels of interest in European funding to enable projects to be developed and implemented however securing the match funding remains challenging but not impossible. To help bring forward projects there should be a willingness to explore more innovative approaches to match funding both on behalf of applicants and DCLG.

It should also be noted that any changes to the current ERDF Operational Programme (2007-13) at national level may, in practice, not work and risk jeopardising future programme delivery.

Chesterfield Borough Council

April 2012